Why Is My $20 Bill Only Worth $5 Bucks?

Credit Card Management

Keep this in mind next time you're tempted to "put the pizza on plastic".The following information is based on an interest rate of 16.99% to 18.99%:

If your balance is $1000.00 and your minimum required payment is $20.00, then $15.00 of the payment goes to interest and only a small portion pays down the principal. If during the next month you charge $15.00 or $20.00 on that card the same thing happens again.Here's a common scenario for many credit card users...


With a $1000.00 balance on your card and a $20.00 minimum payment due ($15.00 will be for interest. Only $5.00 will be for the principal to actually pay down the balance. Your new balance is $995.00.Yep! You paid $20.00, but it was only worth $5.00

By only paying the minimum due, you'll not be able to get off this merry-go-round for years!! You must work hard to get the balance down and here are just a few ideas:

  • Double the payment. This way your $40 will count for $25 on the principal rather than only $10 if done separately.

  • Avoid using the credit cards and thereby raising the balance.

  • Use cash for those little expenses that REALLY will multiply when charged to your credit card.

  • Pay the bill on time! One of my credit cards charges a $29.00 late fee. Yikes!

  • Watch that credit limit. Some cards charge a fee if you go over you credit limit--mine charges $29.00 for that privilege!

  • Learn to be more frugal! Wait a little longer to buy new items, another week on the next haircut, bring your lunch from home, and so on.

Some reasons to avoid credit card debt:

  • It robs you of your time and money because of the effort needed to get it paid back.

  • It robs you of your peace of mind because it's nagging at you each month

  • Sadly, it's much more fun charging it up than paying down the balance.

Copyright 2000 by Leslie Sausage

About The Author: Leslie Sausage lives with her husband in rural Texas. She is the mom of four grown children, a freelance writer and an elementary school teacher! For creative, practical and fun ideas please visit her web site at http://www.heart4home.net


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January 16, 20060 found this helpful

A year later, I am still paying on my charge card and don't even remember what it is that I bought and am still paying for! This year, I decided to incur no new credit card debt and to work at paying off my existing balances. I am taking the advice from a post on Thriftyfun and using gift cards that I purchase for myself at my favorite stores, they are quick to use like a charge card but I won't be paying any interest to a charge card company; hopefully I am on my way to being charge card free!

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January 17, 20060 found this helpful

Nice article! Am showing it to daughter.

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March 4, 20180 found this helpful

My former step dad was a long haul trucker. He was paying for years on steaks he bought on the road. Now that debit cards are the norm, he might have fared better but he was never one to be frugal. He won 125,000.00 on Bingo once. I asked his wife (not my mom) if they broke even and she just chuckled and shook her head.


Money is like water. Once it slips through your hands, it's down the drain.

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March 4, 20180 found this helpful

I once had credit cards, good credit, good job. I had a medical catastrophe and ended up on welfare. Think about it; it could happen to anyone! At any rate, I haven't had a credit card since. Even after I got back on my feet. My son, seeing what had happened to me, get rid of his credit cards. 25 years and we've been doing just fine without. I suggest it for everyone. It's to easy to charge on impulse. With all the money I can save not paying on interest, I can have money in savings for emergencies.

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March 5, 20180 found this helpful

The trick is to pay off the whole amount EVERY MONTH. That way you won't get charged any interest. Bank of America puts out a very good 1-2-3 card. 3% on gas, 2% on grocery stores (including Super Walmart everything there, and places like the 99cent store which sells groceries), and 1% on everything else.


At the end of the month, if you have over $20,000 in their bank in various accounts such as checking, savings, or investments through Merrill Lynch, you will get back all those percentages PLUS an extra 25% of that amount. I pay any bill that I can (phone, insurance on house and car, etc.) through this card so I get a lot of money back!

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